focus briefly on politics and consider whether your party is up or down, and whether you look like a prime minister or a duffer.
I became increasingly obsessed with this theory, and knew that the London mayoral election in May 2008 was another such moment. We would only win in London if we could find a candidate who could reach out beyond our Conservative-voting base.
Boris Johnson likes to say he was my last choice, but it’s not true. George and I were keen to persuade him, and we worked hard to do so. One of the promises we made was that we would do everything to help him run the best-financed and organised campaign that money could buy. We made good on this promise by delivering to him the best campaigner on the planet: Lynton Crosby.
On election night, when it became clear the Conservatives were going to have their first London mayor, Boris arrived at the party at Millbank. As we walked in together, we joined hands and raised them in the air. A great pic. But Boris didn’t let go. So, rather strangely, we walked into Millbank Tower hand in hand. ‘I told you: hold, lift, drop,’ Andy chastised us. ‘Where was the drop?’ Of course, the drop came much later.
A fortnight afterwards we faced a by-election in Crewe and Nantwich, following the death of Labour stalwart Gwyneth Dunwoody. I threw myself into the campaign, visiting the constituency several times. Standing on a bench in the high street, giving an impromptu speech, I looked around at all the support – sometimes you don’t need tracker polls, you can just sense it – and I thought: we’re going to win this.
We did – the first by-election win from Labour since 1982. Ed Timpson became the first Tory in Crewe since the 1930s. The tide was turning.
But despite being on a roll, news of another by-election was much less welcome.
The shadow home secretary David Davis had decided, bizarrely, to force a contest in his Yorkshire constituency in protest at Labour’s increase of the maximum period of detention without trial from twenty-eight days to forty-two. This was a policy our party was vigorously opposing in Parliament, so the only conclusion I could reach was that the whole thing was a vain – and potentially damaging – ego trip.
William – yet more William wisdom – made me promise that I would not guarantee David his job back once the by-election was over. ‘It’s a team game, and he’s decided to leave the team,’ was his blunt assessment.
I called David and explained that if he insisted on the by-election, we would support him in the campaign. But I needed a full-time shadow home secretary, and could not guarantee him a return to the role. The truth was that I was delighted to have this unexpected opportunity to dispense with him, without anyone being able to say I was to blame.
I played it safe with his replacement as shadow home secretary, appointing Dominic Grieve, the shadow attorney general and a top Commons performer. While his views on combatting terror were similar to David’s, they were a little more nuanced, and I felt he would give more priority to concerns about national security.
In the end, the division between civil liberty Conservatives like him and national security Conservatives like me was to prove fatal, as we were later to clash over the European Court of Human Rights. These tensions paved the way for Theresa May. One of the reasons I thought she’d make a great home secretary was that we agreed on these issues and many more.
All my woes during the beginning of Gordon Brown’s premiership were about to pale, however, as two meteorites hit British politics in quick succession: the financial crash and the MPs’ expenses scandal. Both would shake people’s faith in the establishment, shape politics – and in the case of the crash have a huge impact on people’s lives for many years to come.
Brown was right to say that the economic crisis ‘started in America’, because it was there that subprime mortgage lenders had been providing credit to people who hadn’t a hope of paying the money back. Other financial institutions sliced and diced these loans into toxic bonds that were bought worldwide as investors searched for high yields.
And, of course, it was in 2008 that American investment bank Lehman Brothers fell, dragging the world’s financial markets down with it. But it was a crisis to which Britain was particularly exposed. Our lending and banking practices had been infected with similar over-exuberance. One of our largest mortgage lenders, Northern Rock, was among the first victims of the credit crunch, and faced collapse in 2007. Our banks were some of the most over-leveraged (indeed, the later bailout of the Royal Bank of Scotland remains the biggest rescue of a bank ever). And – absolutely crucially – our economy was built on a mountain of debt. Not just private sector debt, but rising government debt from an administration that hadn’t adequately used the good years to run surpluses and pay down debt.
So yes, the fire began in America. But Britain had been piling up kindling for many years.
Being the opposition party at this moment left us with a difficult balancing act. Hold the government to account, but don’t damage the national interest. Support the government in its necessary action, but make sure you don’t become an irrelevant echo. Think through the policies needed for the future in a way that convinces people, while avoiding populist kneejerks. An additional complication was that we were the party that had championed the deregulation that some were arguing had allowed the bad banking practices to take place. We were up against a prime minister who had been chancellor for a decade, and who believed he understood the complexities of the international financial system better than anyone.
And then there was the most difficult thing. We had agreed – and announced back in September 2007 – to match Labour’s public spending plans.
Governments determine the base line of arguments about tax and spending. If you depart from it, you end up vulnerable (as we had been in 2001 and 2005) to being described as vicious cutters or, as in Labour’s case, big taxers.
Labour had solved that problem in 1997 by offering voters a period of stability in which they would match our plans. After that, all bets were off. We had been critical in the 2005 election of Labour’s borrowing and spending, and remained critical, but we had lost the argument. We had had to make a decision when a possible 2007 election loomed, and had decided to use Labour’s 1997 technique. We would match their plans for a couple of years, allowing us the freedom to impose better control after that.
In the light of the 2008 crash, this was clearly a policy mistake, if not a political one, and we needed to change our approach. So we tried to do three things in framing our response.
First, we would be constructive. As Her Majesty’s Loyal Opposition, moments of national crisis demand that you put the emphasis on the word ‘loyal’. Over in America we were seeing the damage that could be caused by political wrangling, with the rejection by Congress on 29 September 2008 of the Troubled Asset Relief Program. It sent the markets into free fall.
I was in Birmingham at our party conference, and decided to make an emergency statement on the penultimate day. In that, and in my main speech on the final day, I struck a constructive tone. Not only should we be working with the government, but with the financial services industry. I knew instinctively that this was what was needed to meet our short-term priority: preventing a rapid banking collapse and thereby protecting people’s jobs, homes and businesses. And I knew it was necessary to meet our long-term aim: fixing the free enterprise system so that never again could it inflict this damage.
That’s why we supported Brown’s plans for the recapitalisation of the banks, for example when the government bought 58 per cent of RBS in November 2008. There was a strong argument for stripping the most damaged assets out of the banks and creating a ‘Bad Bank’, as other countries had done in previous crises, but ultimately we backed the injection of public funds to prevent their collapse.
Second, we took our time. We formed a council of advisers, comprising former banking chiefs, top civil servants, Conservative chancellors and others, to guide our approach. Sir Brian Pitman, former head of Lloyds Bank, who I had got to know when I was at Carlton, was a regular visitor. Terry Burns, former Treasury permanent secretary, was key, as was Ken Clarke, who we soon brought back into the fold